Question 1

Figure 14-7  
-Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

Accepted Answer

A)  $5,500, and its profit amounts to $20,375. 
B)  $5,750, and its profit amounts to $20,375 
C)  $5,980, and its profit amounts to $25,750. 
D)  $6,180, and its profit amounts to $25,750. 
A)  $5,500, and its profit amounts to $20,375. 
B)  $5,750, and its profit amounts to $20,375 
C)  $5,980, and its profit amounts to $25,750. 
D)  $6,180, and its profit amounts to $25,750.

Question 2

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether an individual firm will shut down in the short run, or choose to remain in the market. Explain your answer.

Accepted Answer

The losses and revenues are identified o

Question 3

Figure 14-7  
-Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Accepted Answer

A)  $75. 
B)  $85. 
C)  $95. 
D)  All of the above are correct. 
A)  $75. 
B)  $85. 
C)  $95. 
D)  All of the above are correct.

Question 4

Table 14-1
  
-Refer to Table 14-1. Over what range of output is marginal revenue declining?

Accepted Answer

A)  1 to 6 units 
B)  3 to 7 units 
C)  7 to 9 units 
D)  Marginal revenue is constant over the entire range of output. 
A)  1 to 6 units 
B)  3 to 7 units 
C)  7 to 9 units 
D)  Marginal revenue is constant over the entire range of output.

Question 5

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as P-

Question 6

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Accepted Answer

A)  positive profits. 
B)  zero profits. 
C)  losses but will remain in business. 
D)  losses and will shut down. 
A)  positive profits. 
B)  zero profits. 
C)  losses but will remain in business. 
D)  losses and will shut down.

Question 7

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. At Q=500, the firm's profits equal

Accepted Answer

A)  $1,000. 
B)  $4,000. 
C)  $7,000. 
D)  $10,000. 
A)  $1,000. 
B)  $4,000. 
C)  $7,000. 
D)  $10,000.

Question 8

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? i) Marginal revenue equals $3.
Ii) Average revenue equals $600.
Iii) Average revenue exceeds marginal revenue, but we don't know by how much.

Accepted Answer

A)  i) only 
B)  iii) only 
C)  i) and ii) only 
D)  i), ii), and iii) 
A)  i) only 
B)  iii) only 
C)  i) and ii) only 
D)  i), ii), and iii)

Question 9

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

Accepted Answer

A)  its average revenue is greater than $8. 
B)  its marginal revenue is less than $8. 
C)  its total cost is less than $4,000. 
D)  All of the above are correct. 
A)  its average revenue is greater than $8. 
B)  its marginal revenue is less than $8. 
C)  its total cost is less than $4,000. 
D)  All of the above are correct.

Question 10

In a perfectly competitive market, the process of entry and exit will end when i) accounting profits are zero.
Ii) economic profits are zero.
Iii) price equals minimum marginal cost.
Iv) price equals minimum average total cost.

Accepted Answer

A)  i) and ii) only 
B)  ii) and iii) only 
C)  ii) and iv) only 
D)  i), ii), iii), and iv) 
A)  i) and ii) only 
B)  ii) and iii) only 
C)  ii) and iv) only 
D)  i), ii), iii), and iv)

Question 11

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area

Accepted Answer

A)  P4 - P2) × Q2. 
B)  P2 - P1) × Q2-Q1). 
C)  At a market price of P2, the firm earns profits, not losses. 
D)  At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses. 
A)  P4 - P2) × Q2. 
B)  P2 - P1) × Q2-Q1). 
C)  At a market price of P2, the firm earns profits, not losses. 
D)  At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.

Question 12

Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

Accepted Answer

A)  is greater than marginal revenue. 
B)  equals marginal revenue. 
C)  is less than marginal revenue. 
D)  is minimized. 
A)  is greater than marginal revenue. 
B)  equals marginal revenue. 
C)  is less than marginal revenue. 
D)  is minimized.

Question 13

A competitive market will typically experience entry and exit until accounting profits are zero.

Accepted Answer

A) True 
 B)False

Question 14

List and describe the characteristics of a perfectly competitive market.

Accepted Answer

There are many buyers and sell

Question 15

Figure 14-10
In the figure below, panel a) depicts the linear marginal cost of a firm in a competitive market, and panel b) depicts the linear market supply curve for a market with a fixed number of identical firms.
  
-Refer to Figure 14-10. If there are 500 identical firms in this market, what is the value of Q2?

Accepted Answer

A)  12,000 
B)  60,000 
C)  240,000 
D)  300,000 
A)  12,000 
B)  60,000 
C)  240,000 
D)  300,000

Question 16

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
• When the firm produces and sells 150 units of output, its average total cost is $24.50.
• When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. When the firm increases its output from 150 units to 151 units, its profit

Accepted Answer

A)  decreases by $5.75. 
B)  decreases by $7.20. 
C)  increases by $4.15. 
D)  increases by $7.95. 
A)  decreases by $5.75. 
B)  decreases by $7.20. 
C)  increases by $4.15. 
D)  increases by $7.95.

Question 17

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Accepted Answer

A)  rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. 
B)  rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. 
C)  fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
D)  not rise in the short run because firms will enter to maintain the price. 
A)  rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. 
B)  rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. 
C)  fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
D)  not rise in the short run because firms will enter to maintain the price.

Question 18

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
  
-Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Accepted Answer

A)  $55 
B)  $120 
C)  $137 
D)  $140 
A)  $55 
B)  $120 
C)  $137 
D)  $140

Question 19

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Accepted Answer

A)  exceeds P3. 
B)  is less than P1. 
C)  is greater than P1 but less than P3. 
D)  exceeds P2. 
A)  exceeds P3. 
B)  is less than P1. 
C)  is greater than P1 but less than P3. 
D)  exceeds P2.

Question 20

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. At Q=499, the firm's total costs equal

Accepted Answer

A)  $5,983. 
B)  $5,988. 
C)  $5,995. 
D)  $5,999. 
A)  $5,983. 
B)  $5,988. 
C)  $5,995. 
D)  $5,999.

Figure 14-7 -Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Table 14-1 -Refer to Table 14-1. Over what range of output is marginal revenue declining?

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=500, the firm's profits equal

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? i) Marginal revenue equals $3. Ii) Average revenue equals $600. Iii) Average revenue exceeds marginal revenue, but we don't know by how much.

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

In a perfectly competitive market, the process of entry and exit will end when i) accounting profits are zero. Ii) economic profits are zero. Iii) price equals minimum marginal cost. Iv) price equals minimum average total cost.

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

A competitive market will typically experience entry and exit until accounting profits are zero.

List and describe the characteristics of a perfectly competitive market.

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=499, the firm's total costs equal

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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Exam 13: Firms in Competitive Markets

Figure 14-7 -Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Table 14-1 -Refer to Table 14-1. Over what range of output is marginal revenue declining?

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=500, the firm's profits equal

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? i) Marginal revenue equals $3. Ii) Average revenue equals $600. Iii) Average revenue exceeds marginal revenue, but we don't know by how much.

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

In a perfectly competitive market, the process of entry and exit will end when i) accounting profits are zero. Ii) economic profits are zero. Iii) price equals minimum marginal cost. Iv) price equals minimum average total cost.

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

A competitive market will typically experience entry and exit until accounting profits are zero.

List and describe the characteristics of a perfectly competitive market.

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=499, the firm's total costs equal

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters